Friday, April 19, 2013

Is ‘C’ Word Missing in SWOT

SWOT Analysis is instrumental in Strategy Formulation and Selection. It is a strong tool, but it involves subjective element. It is best used as a guide not as a prescription. Some say, there’s ‘C”-Customer missing in SWOT, is it true?

1. The Purpose of SWOT

 For a proper SWOT, you need a clear objective. The team needs to know WHAT you want to investigate. This is very important. Then you need to have the RIGHT QUESTIONS to analyze and you need to get the RIGHT CONCLUSION out of the analysis. 

  • The SWOT analysis is not an entire strategy development process. The SWOT process is one of practical tools in the entire strategy process typically used for top level analysis and positioning. The most important point in the SWOT Analysis is how to eliminate / reduce subjectivity and how to prioritize by category. Also there are many other tools for analyzing the customer need profile and value stream and competitive environment that provide the color needed that the SWOT process doesn't provide.
  • Internal, External-Factors in SWOT :
    1) The SWOT integrates 2-Factors Groups (Internal and External)
    2) External Factors are analyzed in Opportunities and Threats
    The elements to be considered in the group of External Factors are:
    3) Market / Customers / Buyers (Segmented)
    4) Competitors (Old / New / Potential)
    5) Complementary (Strategic Alliances)
    6) Suppliers
    7) Sector / Industry
    8)Environment (Local & Global PESTLIED: Political, Economic, Social, Technological, Legal, International, Environmental, Demographic)      
  • Many SWOT analyses, as presented, seem nothing more than a "Pot-Pourri" of opinions. However, that is OK if recognized as such. Opinions become hypotheses that become the subject of discussion and analysis. Where the hypothesis can be backed-up by analysis, we no longer have an "opinion" but an "evidence-based" SWOT.  

2. Is ‘C’ Missing in SWOT 

Some say C is missing in SWOT analysis. "C" means "Customer".  Next to Strength, Weakness, Opportunity and Threat should always stand Customer. The SWOT is not just four boxes, but has the Customer in the middle of it. Others argue, the C is implicit in Opportunities. Therefore, the 'C' (Market / Customers / Buyers) is considered within the External Factors. How can one have opportunities without potential customers? It is difficult to imagine conducting a SWOT analysis that doesn't consider opportunities or threats to the organization's relationship to "customers"

  • SWOT used as Springboard: SWOT has its uses for simplicity, but it does not capture the complete complexities of the real world, one may say whether popping a "C" in front of it is the magic solution. Same holds true for another approaches summarized in an acronym: NIRC (needs, interests, resources, and capacities). The most important piece is the process of analysis, discussion, and level of engagement from stakeholder, for which SWOT can be used as a springboard, and in combination with other approaches, such as stakeholder analysis, problem analysis, etc 
  • Evidence-based SWOT analysis provides a comprehensive view of the "choices" that need to be made and balanced in formulating a strategy. Customer knowledge and value creation are indeed anchors of a strategy. However, in the language of science, they are necessary but not sufficient. Strategy is more than marketing; strategy rests on the assumption that rivalry (competition and cooperation) will occur and that choices must be made (using your knowledge of customers and competitors) in terms of what (and to what extent) customer needs will be satisfied and how rivals (both existing and future) are capable of frustrating the firm in achieving its other (non-customer) objectives.  
  •  “C”s & “V”s Implicit in SWOT:
1) If by "C" you mean "the Customer" then clearly the OT contains an analysis of the customer (contained in the 5 Forces Industry and Competitive Analysis).
2): If by "C" you mean "the Competitors" then clearly the OT contains the analysis of the competitors (contained in the 5 Forces I&CA).
3): If by "V" you mean "creating and capturing Value" then clearly the use of the Value Chain in the SW means you are analyzing how you create and capture "economic value".
4): If by "C" you mean "strategic Choices", then a SWOT analysis is the first step in making the hard choices which customer segments to serve and what value is created for all stakeholders.

If we are talking about Competitive Strategy (at the business unit or corporate level) then a SWOT analysis needs to be done at the (whole) firm level. A SWOT analysis at the customer market segment level would still need to be aggregated to form a "view" for the firm (or enterprise).

3. More Alphabetic Letters Implicit in SWOT

There's no 'one size fits all' approach. Different businesses in different industries under different circumstances may require a tool to take a deep dive in all those factors. With all of these "well-known" analytic tools, SWOT indeed is a valuable tool, there’re more letters implicit in SWOT:
  • The 4P (product, price, promotion, place) or 7P (4P + Packaging, Positioning, People) models of the Marketing Mix all rely on a clear understanding of the Customer and the Consumer (who are not necessarily the same) and segmentation therein. The 4P/7P models are the basis for forming a Marketing Strategy, not a Competitive Strategy. SWOT has the ability to encompass 4/7 Ps analysis.  
  • The 3 “C”s: Customer, Competitor, Choice: What's happened to your understanding of competitors and the competitive environment? Do you view SWOT only through the prism or conceptual lens of customers or through a broader "industry" canvas which includes competitors and competitive context as well as customers?  
  • The 3 ‘T's: Threat, Trends and Truth. SWOT as a snapshot of the current situation, by capturing three ‘T’s-Threat, Trends, and Truth, SWAT can cultivate system thinking, any output is a potential input into some other processes.
  • SWOT++: Make SWOT a key building block to CREATIVE Strategic Planning and Creative Change Management by conducting a SWOT++.:What should we NOT change? What is the Urgency (Why Now?) etc. That's just a few samples. The second + creates a layer on top of all the other analyses for Possible Strategies & Actions. For example, if these are our Strengths, then what actions should we take now to maintain them? If these are Opportunities, then what Strategies should we consider initiating those opportunities? Too often leaders and facilitators conduct a SWOT and then do NOTHING with it. 
Whether SWOT is a waste of time, either in anchoring business plans or as a means of examining the current state of an organization, depends entirely upon your perspective, etc. what you believe SWOT does. In some organizations, a SWOT analysis has moved from being ”gathering-pot” of executive (and other) opinions to a better organized, fact-based analysis which can be discussed and verified. It has moved from being a "gut-feel" view of the firm's current market attractiveness and competitive position to something which can be validated through research and analysis. And there are critical “C”s in SWOT.


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